<PAGE>   1
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                    FORM 10-Q

[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
    ACT OF 1934

    For the quarterly period ended September 30, 1999

[ ] TRANSITION REPORT PURSUANT OR TO SECTION 13 or 15(d) OF THE SECURITIES
    EXCHANGE ACT OF 1934

    For the transition period ______________________ to _____________________


                         Commission File Number: 1-10916


                             INTERVISUAL BOOKS, INC.
--------------------------------------------------------------------------------
             (Exact name of registrant as specified in its charter)


            California                                           95-2929217
-------------------------------                              -------------------
(State or other jurisdiction of                               (I.R.S. Employer
incorporation or organization)                               Identification No.)


2716 Ocean Park Boulevard, Suite 2020
     Santa Monica, California                                       90405
--------------------------------------                       -------------------
Address of principal executive offices                             Zip Code


Registrant's telephone number, including area code: (310) 396-8708

         Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes  X   No
                                              ---     ---

          APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS
                        DURING THE PRECEDING FIVE YEARS:

         Indicate by check mark whether the registrant has filed all documents
and reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court. Yes     No
                         ---     ---

         APPLICABLE ONLY TO CORPORATE ISSUERS: Indicate the number of shares
outstanding of each of the issuer's classes of common stock, as of the latest
practical date. As of September 30, 1999, there were 5,885,115 shares of common
stock outstanding.


<PAGE>   2

                             INTERVISUAL BOOKS, INC.

                                TABLE OF CONTENTS

<TABLE>
<CAPTION>

                                                                                Page
                                                                                ----
<S>               <C>                                                           <C>
PART I - FINANCIAL INFORMATION

         Item 1.  Financial Statements

                  Balance Sheets - September 30, 1999, and December 31, 1998      1

                  Statements of Operations - Three and Nine months ended
                  September 30, 1999 and 1998                                     2

                  Statements of Cash Flows - Nine months ended September 30,
                  1999 and 1998                                                   3

                  Notes to Financial  Statements - September 30, 1999             4

         Item 2.  Management's Discussion and Analysis of Financial Condition
                  and Results of Operations                                       6

         Item 3.  Quantitative and Qualitative Disclosures about Market Risk      9

PART II - OTHER INFORMATION

         Item 4.  Submission of Matters to a Vote of Security Holders            10

         Item 6.  Exhibits and Reports on Form 8-K                               10

SIGNATURES                                                                       11
</TABLE>


                                       i

<PAGE>   3

                             INTERVISUAL BOOKS, INC.

                                 BALANCE SHEETS
                                 (In thousands)

<TABLE>
<CAPTION>
                                                        9/30/99        12/31/98
                                                     -------------   ------------
                                                      (unaudited)
<S>                                                    <C>             <C>
ASSETS

Current Assets:
   Cash and cash equivalents                           $    372        $  1,561
   Accounts receivable, less allowances
      of $115 and $175                                    7,510           2,246
   Inventories                                            2,129           1,634
   Prepaid expenses                                         136             159
   Commission and royalty advances                          527             352
   Income taxes receivable                                   --             117
   Other current assets                                     196             206
                                                       --------        --------
      Total current assets                               10,870           6,275

Production costs, net of accumulated
    amortization of $16,649 and $15,721                   3,435           3,427
Goodwill                                                  1,559              --
Acquisition costs                                           342              83
Other assets                                                 13              --
Property and equipment, net of accumulated
   depreciation of $1,634 and $952                          308             187
Deferred income taxes                                       513             443
                                                       --------        --------
                                                       $ 17,040        $ 10,415
                                                       ========        ========
LIABILITIES AND STOCKHOLDERS' EQUITY

Current Liabilities:
   Accounts payable                                       7,493           3,131
   Line of credit                                         1,605           1,700
   Accrued royalties                                        210             282
   Accrued expenses                                         164             226
   Customer deposits                                        440              68
                                                       --------        --------
     Total current liabilities                            9,912           5,407

Long term debt                                            2,200              --
Other liabilities-long term                                 197              85
                                                       --------        --------
     TOTAL LIABILITIES                                   12,309           5,492
                                                       --------        --------
Stockholders' Equity:
   Preferred stock, shares authorized
      3,000,000, none issued                                 --              --
   Common stock, no par value; shares
     authorized 12,000,000, shares issued and
     outstanding 5,885,115 at September 30, 1999
     and 5,164,531 at December 31, 1998                   5,290           4,731
   Additional paid in capital                               367             330
   Retained deficit                                        (926)           (138)
                                                       --------        --------
     TOTAL STOCKHOLDERS' EQUITY                           4,731           4,923
                                                       --------        --------
                                                       $ 17,040        $ 10,415
                                                       ========        ========
</TABLE>

See accompanying notes to financial statements

                                       1

<PAGE>   4

                             INTERVISUAL BOOKS, INC.

                            STATEMENTS OF OPERATIONS
                      (In thousands except per share data)
                                   (Unaudited)

<TABLE>
<CAPTION>
                                            Quarter Ended Sept. 30,         9 Months Ended Sept. 30,
                                            ------------------------        ------------------------
                                              1999            1998            1999            1998
                                            --------        --------        --------        --------
<S>                                         <C>             <C>             <C>             <C>
Net sales                                   $  6,598        $  3,537        $ 11,875        $  8,274
Rights income                                     28              53             221             256
                                            --------        --------        --------        --------
Total revenues                                 6,626           3,590          12,096           8,530

Cost of sales                                  5,064           2,920           9,246           6,672
                                            --------        --------        --------        --------

Gross profit                                   1,562             670           2,850           1,858

Selling, general and
   administrative expenses                     1,402           1,035           3,481           3,333
                                            --------        --------        --------        --------

Income (loss) from operations                    160            (365)           (631)         (1,475)

Interest expense                                 (84)            (23)           (185)            (26)
                                            --------        --------        --------        --------

Income (loss) before income taxes                 76            (388)           (816)         (1,501)

Income tax benefit                                --             (94)            (70)           (397)
                                            --------        --------        --------        --------

Net income (loss)                           $     76        $   (294)       $   (746)       $ (1,104)
                                            ========        ========        ========        ========

Loss per common share
   Basic                                    $   0.01        $  (0.06)       $  (0.13)       $  (0.22)
                                            ========        ========        ========        ========
   Diluted                                  $   0.01        $  (0.06)       $  (0.13)       $  (0.22)
                                            ========        ========        ========        ========

Weighted average number of common
  shares and equivalents outstanding:
    Basic                                      5,885           5,138           5,549           5,094
                                            ========        ========        ========        ========
    Diluted                                    5,885           5,138           5,549           5,094
                                            ========        ========        ========        ========
</TABLE>

See accompanying notes to financial statements.

                                       2

<PAGE>   5

                             INTERVISUAL BOOKS, INC.

                            STATEMENTS OF CASH FLOWS
                Increase (Decrease) in Cash and Cash Equivalents
                                 (In thousands)

<TABLE>
<CAPTION>
                                                                            Nine Months Ended
                                                                                Sept. 30,
                                                                         ----------------------
                                                                           1999           1998
                                                                         --------       -------
                                                                               (Unaudited)
<S>                                                                      <C>            <C>
Cash flows from operating activities:
   Net loss                                                              $  (746)       $(1,103)
   Adjustments to reconcile net loss to net cash
     used in operating activities:
       Depreciation and amortization                                       1,038            858
       Provision for losses on accounts receivable                            --             39
       Provision for abandoned titles                                         28             27
       Excess fair market value over book value of assets acquired            --             (3)
       Deferred income taxes                                                 (70)            --
       Stock-based compensation expense                                       37             --
       Increase (decrease) from changes in:
           Accounts receivable                                            (3,346)           762
           Inventories                                                      (495)        (1,179)
           Prepaid expenses                                                   62           (291)
           Royalty advances                                                   31            (63)
           Other assets                                                      127             --
           Accounts payable                                                1,261         (1,107)
           Accrued royalties                                                (111)          (136)
           Accrued expenses                                                 (155)           (99)
           Income taxes payable                                               --           (130)
           Customer deposits                                                 372             36
           Other liabilities                                                 (38)            --
                                                                         -------        -------
             Net cash used in operating activities                        (2,005)        (2,389)
                                                                         -------        -------

Cash flows from investing activities:
   Additions to property and equipment                                       (29)           (30)
   Additions to leasehold improvements                                        --             (5)
   Additions to production costs                                            (897)          (963)
   Additions to acquisition costs                                           (283)           (47)
                                                                         -------        -------
             Net cash used in investing activities                        (1,209)        (1,045)
                                                                         -------        -------

Cash flows from financing activities:
   Cash acquired in acquisition                                              305             --
   Proceeds from exercise of options                                          70             69
   Proceeds from subordinated line of credit                               2,200             --
   Proceeds from bank line of credit                                         950          1,700
   Repayment on bank line of credit                                       (1,500)            --
                                                                         -------        -------
             Net cash provided by financing activities                     2,025          1,769
                                                                         -------        -------

Net decrease in cash and cash equivalents                                 (1,189)        (1,665)
Cash and cash equivalents, beginning of period                             1,561          2,383
                                                                         -------        -------
Cash and cash equivalents, end of period                                 $   372        $   718
                                                                         =======        =======
Supplemental disclosures of cash flow information:

Cash paid during the period for:
    Income taxes                                                         $     1        $   153
    Interest expense                                                         185             26
</TABLE>


See accompanying notes to financial statements.

                                       3


<PAGE>   6

                          NOTES TO FINANCIAL STATEMENTS

                               September 30, 1999
                                   (unaudited)

Note 1 - Statement of Information Furnished

In the opinion of management the accompanying unaudited financial statements
contain all adjustments (consisting only of normal and recurring accruals)
necessary to present fairly the financial position as of September 30, 1999, and
the results of operations for the three and nine month periods ended September
30, 1999, and cash flows for the nine month period ended September 30, 1999 and
1998. These results have been determined on the basis of generally accepted
accounting principles and practices applied consistently with those used in the
preparation of the Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1998.

The results of operations for the three and nine month periods ended September
30, 1999, are not necessarily indicative of the results to be expected for any
other period or for the entire year.

Certain information and footnote disclosures normally included in financial
statements presented in accordance with generally accepted accounting principles
have been condensed or omitted. The accompanying financial statements should be
read in conjunction with the Company's audited financial statements and notes
thereto included in the Company's Annual Report on Form 10-K for the year ended
December 31, 1998.

Note 2 - Loss Per Common Share

The Company computes loss per common share under SFAS No. 128, "Earnings Per
Share," which requires presentation of basic and diluted earnings (loss) per
share. Basic earnings (loss) per common share is computed by dividing income or
loss available to common shareholders by the weighted average number of common
shares outstanding for the reporting period. Diluted earnings (loss) per common
share reflects the potential dilution that could occur if securities or other
contracts, such as stock options, to issue common stock were exercised or
converted into common stock. Common stock options for the three and nine months
ended September 30, 1999 and 1998 were not included in the computation of
diluted loss per common share because the effect would be antidilutive.


                                       4


<PAGE>   7

Note 3 - Fast Forward Marketing Acquisition

On May 14, 1999, the Company completed the acquisition of Fast Forward
Marketing, Inc., (Fast Forward). The transaction was completed under the terms
and conditions of a definitive agreement signed March 29, 1999. Under this
agreement, the Company acquired all the outstanding shares of Fast Forward for
670,000 shares of its common stock, a contingent cash payment of up to $200,000
due May 1, 2000, and a cash payment of $150,000 due May 1, 2001 subject to
reduction for the payment by the Company of certain tax withholdings. The
contingent cash payment of up to $200,000 or a lesser prorated amount is due if
Fast Forward achieves between 70% and 90% of its 1999 projected gross margin,
provided a minimum gross margin requirement is met. Of the 670,000 shares
issued, 594,940 are restricted for three years so that no more than 10% can be
sold in any one year. The remaining 75,060 shares were issued to certain
employees under a pre-existing Fast Forward Phantom Stock Plan. The
transferability of these shares is restricted for the period the employee
remains with the Company or three years whichever is less. In connection with
the acquisition of Fast Forward, The Hunt Family Trust agreed to vote its shares
in favor of the election to the Company's Board of Directors of Steven Ades and
a second nominee, mutually acceptable to the Company and Mr. Ades, for as long
as Mr. Ades is employed by the Company. This transaction has been accounted for
as a purchase. On May 14, 1999, the Company issued shares valued at $489,000 and
agreed to a contingent cash payment of up to $200,000 and an additional $150,000
payment both due at a later date in exchange for the net book value of Fast
Forward of ($957,000). This resulted in goodwill of $1,596,000 which is being
amortized over the estimated useful life of 20 years.

Note 4 - Lines of Credit

The Company signed an agreement with its bank on May 12, 1999 and later amended
effective September 30, 1999 that provides for borrowings up to a maximum of
$2,000,000 depending on availability. This agreement which expires on May 1,
2000 has an interest rate of 2.5% over prime. The Company also on May 12, 1999
signed a loan agreement with a private party that provides a revolving line of
credit of up to $2,300,000. This agreement is for one year and has an interest
rate of 5% above the 3-month LIBOR rate. At the Company's option, this agreement
can be extended for an additional year under the same terms and conditions. If
the Company decides to extend this line of credit, the agreement requires that
warrants for up to 150,000 shares of the Company's common stock to be issued.
These warrants are exercisable for up to two years after the issue date at a
price equal to the average trading price of the Company's stock for the 20 day
period prior to the Company's notice to extend the loan agreement. The Company
expects to extend this loan for an additional year and has reclassified the
related debt to long term debt. In both credit agreements, the Company makes
affirmative and negative covenants and the agreement with the Company's bank
contains certain financial covenants. As of September 30, 1999, the Company was
in compliance with all financial covenants as amended. In connection with both
agreements, the Company granted to the lenders a security interest in all of its
assets. As of September 30, 1999, the Company had borrowings of $1,605,000 under
its bank line of credit and $2,200,000 of borrowings under its revolving line of
credit.

Note 5 - Accounts Receivable and Payable

Fast Forward has an agreement with its customers and suppliers that allows for
returns of merchandise. Accordingly, a reserve for accounts receivable and
payable has been provided. The reserve accounts require the use of significant
estimates. Fast Forward believes the techniques and assumptions used in
establishing the reserve accounts are appropriate. At September 30, 1999, Fast
Forward recorded a reserve for returns against accounts receivable of $201,000
and a reserve for returns against accounts payable for $174,000.


                                       5

<PAGE>   8

Item 2. Management's Discussion and Analysis of Financial Condition and
        Results of Operations

GENERAL

Intervisual Books, Inc. (the "Company") creates and produces interactive and
three-dimensional books designed for children and adults. These products include
picture books, playsets, board books and gift books. The Company's books
incorporate dimensional and moveable features which require hand-assembly in the
manufacturing process. Some titles require the incorporation of such materials
as plush, plastic novelty elements and electronic audio chips into the finished
books.

The majority of the Company's concepts and ideas for projects are generated
internally by the in house creative and editorial departments. Additional ideas
and concepts are conceived by the illustrators and designers with whom the
Company has been associated for many years. After the Company conceives an idea
and makes a dummy book, key US and foreign publishers are consulted to determine
if they are interested in publishing and marketing the book. If an agreement is
reached, the Company and the publisher sign a co-publishing contract which
stipulates that the publisher will purchase the title with exclusive rights to
sell books in the English language to the book trade for generally a two to four
year period.

The Company also self-publishes titles and offers the books directly to
retailers. The recent acquisition of Fast Forward Marketing, Inc. (see Note 3)
brings to the Company a trained sales force which will enhance the Company's
ability to sell and service retailers. As a result of the Fast Forward
acquisition, the Company also distributes video and audio products for major
motion picture studios, including Walt Disney, Warner Bros., Universal,
Paramount, 20th Century Fox, and many independent producers. Since its founding
in 1987, Fast Forward has built an account base of more than 4,000 retailers,
including national chains such as Toys R Us, Blockbuster, Target, Borders,
Musicland and Best Buy, as well as specialty retailers such as Zany Brainy,
Store of Knowledge, Noodle Kidoodle, Books A Million and other children's
bookstores, gift shops, museums, zoos and Internet retailers such as E-Toys.
Until the end of 1999, the Company will also market its products to retailers
using the services of Andrews McMeel, a leading US publisher/distributor located
in Kansas City. Andrews McMeel handles sales, collection, billing, warehousing
and order fulfillment functions. Effective January 1, 2000, all sales,
collections, and billing will be brought in house, while warehousing and order
fulfillment will be handled by Ware-Pak, an independent company located in
University Park, Illinois.

The market for packaged books has gone through recent changes which has made it
more difficult for the Company to generate co-editions. In the past five years,
there has been a consolidation trend in the US publishing industry that has
reduced the number of the Company's customers. Many of the surviving children's
imprints are still consolidating, which is continuing to have a negative impact
on the size and frequency of their orders. This trend has been a major factor in
the Company's decision to self-publish. The Company's self-publishing program is
gaining consumer acceptance, indicating its interactive books and playsets are
still in demand.

The Company does not engage in any of its own printing, binding, hand assembly,
or manufacturing. These services are contracted for with independent printers in
Colombia, Singapore, Hong Kong and Thailand. The Company supplies its printers
with artwork, color-separated materials and complete sample materials to serve
as guides for hand-assembly.


                                       6

<PAGE>   9

On May 14, 1999, the Company completed the acquisition of Fast Forward
Marketing, Inc., (Fast Forward). The transaction was completed under the terms
and conditions of a definitive agreement signed March 29, 1999. Under this
agreement, the Company acquired all the outstanding shares of Fast Forward for
670,000 shares of its common stock, a contingent cash payment of up to $200,000
due May 1, 2000, and a cash payment of $150,000 due May 1, 2001 subject to
reduction for the payment by the Company of certain tax withholdings. The
contingent cash payment of up to $200,000 or a lesser prorated amount is due if
Fast Forward Marketing achieves between 70% and 90% of its 1999 projected gross
margin, provided a minimum gross margin requirement is met. Of the 670,000
shares issued, 594,940 are restricted for three years so that no more than 10%
can be sold in any one year. The remaining 75,060 shares were issued to certain
employees under a pre-existing Fast Forward Phantom Stock Plan. The
transferability of these shares is restricted for the period the employee
remains with the Company or three years, whichever is less. In connection with
the acquisition of Fast Forward, The Hunt Family Trust agreed to vote its shares
in favor of the election to the Company's Board of Directors of Steven Ades and
a second nominee, mutually acceptable to the Company and Mr. Ades, for as long
as Mr. Ades is employed by the Company. This transaction was accounted for as a
purchase. On May 14, 1999, the Company issued shares valued at $489,000 and
agreed to a contingent cash payment of up to $200,000 and an additional $150,000
payment both due at a later date in exchange for the net book value of Fast
Forward Marketing of ($957,000). This resulted in goodwill of $1,596,000 which
is being amortized over the estimated useful life of 20 years.

RESULTS OF OPERATIONS

Net sales for the three and nine month period ended September 30, 1999 were
$6,598,000 and $11,875,000, respectively, as compared to $3,537,000 and
$8,274,000 for the comparable periods of the preceding year. Sales were up
$3,061,000 and $3,601,000, respectively, for the three and nine month periods
ended September 30, 1999 as compared to the prior year. Domestic sales of book
products were up $250,000 and $268,000, respectively, for the quarter and nine
month periods, while foreign sales were up $196,000 for the quarter and down
$307,000 for the nine month period. Included in the three and nine month figures
were $2,614,000 and $3,639,000, respectively, of video sales from the newly
acquired Fast Forward Marketing.

Rights income for the three and nine month periods of 1999 were $28,000 and
$221,000, respectively, as compared to $53,000 and $256,000 for the same periods
of the prior year. This income is primarily derived from the Company's sale of
worldwide direct marketing rights on some of its products. These sales do not
require that the Company manufacture, and, therefore, have no related cost.

Gross profit margin for both the three and nine month periods ended September
30, 1999 was 23.6% as compared to 18.7% and 21.8% for the same periods of the
prior year. Cost of sales consists primarily of manufacturing, book development
amortization and royalties. Improved margins were a result of the Company's
ongoing efforts to get better prices from its customers and lower costs from its
printers.

Selling, general and administrative expenses for the three and nine month
periods ended September 30, 1999 were $1,402,000 and $3,481,000, respectively,
as compared to $1,035,000 and $3,333,000, respectively, for the comparable
periods of the prior year. Included in the three and nine month periods of 1999
were $541,000 and $837,000, respectively, of overhead expenses from Fast Forward
Marketing


                                       7
<PAGE>   10

which were not in last year's figures. Personnel expenses, a major component of
S G & A, were $772,000 and $1,881,000 for the three and nine month periods ended
September 30, 1999, as compared to $484,000 and $1,663,000 for the same periods
of 1998, an increase of $218,000 for the nine month period. This increase can be
attributed primarily to salary and staff reductions and the expiration of a
consulting agreement totalling $431,000 offset by the inclusion of $649,000 in
salary related expenses from Fast Forward Marketing. Selling expenses were
$391,000 and $899,000 for the three and nine month periods ended September 30,
1999, as compared to $302,000 and $894,000 for the same periods of 1998, an
increase of $5,000 for the nine month period. This increase is primarily related
to lower distribution costs relating to the Company's self-publishing efforts
and lower travel and show expenses, partially offset by increased expenses
relating to the addition of a UK sales representative, as well as the addition
of selling related expenses from Fast Forward Marketing in the amount of
$95,000. The Company's administrative expenses were $239,000 and $701,000 for
the three and nine month periods ended September 30, 1999, as compared to
$249,000 and $776,000 for the same periods of 1998, a decrease of $75,000 for
the nine month period. This decrease for the nine months was primarily related
to a reduction in the allowance for uncollectible accounts offset by the
additional expenses from Fast Forward Marketing which were not included in last
year's figures.

LIQUIDITY AND CAPITAL RESOURCES

The Company's cash and cash equivalents decreased by $1,189,000 to $372,000 at
September 30, 1999 from $1,561,000 at December 31, 1998. At September 30, 1999,
working capital was $958,000 compared to $868,000 at December 31, 1998. The
primary use of cash during the nine months ended September 30, 1999 was from
operations.

Net cash used in operations was $2,005,000 for the nine months ended September
30, 1999 as compared to $2,389,000 for the corresponding period of the previous
year. The $384,000 change in cash from operations for the first nine months of
1999 was primarily attributable to increases in net operating loss, accounts
receivable, inventories and accounts payable. Net cash used in investing
activities amounted to $1,209,000 as compared $1,045,000 during the same period
in 1998. This increase in cash used is primarily from costs incurred resulting
from the acquisition of Fast Forward Marketing in May of 1999. Net cash provided
by financing activities was $2,025,000 in 1999 as compared to $1,725,000 for the
same period in 1998. This increase in cash provided is primarily from borrowing
on the Company's line of credit from a private party and additional borrowing
from its bank.

The Company signed an agreement with its bank on May 12, 1999 and later amended
effective September 30, 1999 that provides for borrowings up to a maximum of
$2,000,000 depending on availability. This agreement which expires on May 1,
2000 has an interest rate of 2.5% over prime. The Company also on May 12, 1999
signed a loan agreement with a private party that provides a revolving line of
credit of up to $2,300,000. This agreement is for one year and has an interest
rate of 5% above the 3-month LIBOR rate. At the Company's option, this agreement
can be extended for an additional year under the same terms and conditions. If
the Company decides to extend this line of credit, the agreement requires that
warrants for up to 150,000 shares of the Company's common stock to be issued.
These warrants are exercisable for up to two years after the issue date at a
price equal to the average trading price of the Company's stock for the 20 day
period prior to the Company's notice to extend the loan agreement. The Company
expects to extend this loan for an additional year and has reclassified the
related debt to long term debt. In both credit agreements, the Company makes
affirmative and negative covenants and the


                                       8
<PAGE>   11

agreement with the Company's bank contains certain financial covenants. As of
September 30, 1999, the Company was in compliance with all financial covenants
as amended. In connection with both agreements, the Company granted to the
lenders a security interest in all of its assets. As of September 30, 1999, the
Company had borrowings of $1,605,000 under its bank line of credit and
$2,200,000 of borrowings under its revolving line of credit.

As of November 1, 1999, the Company did not have any commitments for any
material capital expenditures for the remainder of 1999 or beyond. Management of
the Company believes that the existing levels of funds and its ability to borrow
on its lines of credit, combined with the Company's ability to generate cash,
are adequate to finance current and expected levels of activity as well as
anticipated capital expenditures of the Company for at least the next twelve
months.

YEAR 2000 MODIFICATIONS

The Company has reviewed its computer systems to evaluate the extent to which
modifications are necessary to insure year 2000 compliance. The Company has
upgraded its accounting software for year 2000 compliance, as well as other
software programs. All other computer upgrades and modifications needed for year
2000 compliance have been completed. The total expenditures to date have been
minimal and are not estimated to have exceeded $20,000. Given the nature of the
Company's products, the Company believes that its products do not pose year 2000
compliance issues. As with virtually all companies, the Company relies to some
degree, directly and indirectly, on external computer systems utilized by the
Company's suppliers, and the Company is reviewing the impact that any failure by
these third parties to resolve their year 2000 problems might have on the
business of the Company.

This Report on Form 10-Q contains forward-looking statements and includes
assumptions concerning the Company's operations, future results and prospects.
These forward-looking statements are based on current expectations and are
subject to a number of risks, uncertainties and other factors. In connection
with the Private Securities Litigation Reform Act of 1995, the Company provides
the following cautionary statements identifying important factors which, among
other things, could cause the actual results and events to differ materially
from those set forth in or implied by the forward-looking statements and related
assumptions contained in this Section and in this entire Report. Such factors
include, but are not limited to: product demand and market acceptance risks; the
effect of economic conditions; the impact of competitive products and pricing;
changes in foreign exchange rates; product development and commercialization
difficulties; capacity and supply constraints or difficulties; availability of
capital resources; general business and economic conditions; and changes in
government laws and regulations, including taxes.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

All sales by the Company are denominated in US dollars and, accordingly, the
Company does not enter into hedging transactions with regard to any foreign
currencies. Currency fluctuations can, however, increase the price of the
Company's products to its foreign customers which can adversely impact the level
of the Company's export sales from time to time. The majority of the Company's
cash equivalents are bank accounts and money markets, and the Company does not
believe it has significant market risk exposure with regard to its investments.


                                       9
<PAGE>   12

PART II - OTHER INFORMATION

Item 4. Submission of Matters to a Vote of Security-Holders

The Annual Meeting of Shareholders of Intervisual Books, Inc. was held on August
4, 1999 and several matters were put to a vote. The issues and the results are
as follows:

                                                                     Abstentions
                                                                      Withhold
                      Votes Cast For      Votes Cast Against          Authority
                      --------------      ------------------         -----------
(1) To elect eight directors to serve until the next annual meeting of
    shareholders and until their successors are chosen.

Waldo H. Hunt            5,472,923                0                    14,250
Nathan N. Sheinman       5,475,973                0                    11,200
Dan P. Reavis            5,477,723                0                     9,450
Steven D. Ades           5,477,723                0                     9,450
Dr. Neil Berkman         5,477,323                0                     9,850
Gordon Hearne            5,474,173                0                    13,000
Leonard W. Jaffe         5,474,173                0                    13,000
John J. McNaughton       5,474,173                0                    13,000

(2) Proposal to approve Amended and Restated Articles of Incorporation.

                         4,131,425           35,713                     2,560

(3) Proposal to approve 1999 Stock Option Plan.

                         4,117,175           49,263                     3,260

(3) To ratify the selection of BDO Seidman, LLP, as independent auditors of the
    Company for 1999.

                         5,477,263            6,950                     2,960

Item 6. Exhibits and Reports on Form 8-K

(a)     Exhibits required by Item 601 of Regulation S-K

         3.1 -- Amended and Restated Articles of Incorporation

        10.1 -- Amendment Agreement Number One to Loan and Security Agreement
                with Santa Monica Bank

        27   -- Financial Data Schedule

(b)     Reports on Form 8-K

        None


                                       10

<PAGE>   13

                                   SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.

                                            INTERVISUAL BOOKS, INC.



                                            By: /s/ Nathan N. Sheinman
                                                --------------------------------
                                                Nathan N. Sheinman, President
                                                Chief Operating Officer



                                            By: /s/ Dan P. Reavis
                                                --------------------------------
                                                Dan P. Reavis
                                                Executive Vice President
                                                Chief Financial Officer


Date: November 15,1999


                                       11
<PAGE>   14

                                 EXHIBIT INDEX

          EXHIBIT
          NUMBER                  DESCRIPTION
          -------                 -----------

            3.1            Amended and Restated Articles of Incorporation

           10.1            Amendment Agreement Number One to Loan and Security
                           Agreement with Santa Monica Bank

           27              Financial Data Schedule